The Hong Kong’s Financial Dispute Resolution Centre (FDRC), Monetary Authority (MA), and Securities and Futures Commission (SFC) have signed a Memorandum of Understanding (MoU) to delineate the roles and responsibilities among the three parties to ensure smooth operation of the financial dispute resolution scheme as well as to promote co-operation and exchange of information. This MoU is effective from January 1, 2018.1

Business Processes Impacted: Training & Development
The Federal Reserve has announced that it will be eliminating the Strength of Support Assessment (SOSA), including the assignment of a SOSA ranking from the Foreign Banking Organizations supervision program.2

Business Processes Impacted: Recovery & Resolution Planning
The agency has provided feedback on responses to CP9/17 – Recovery Planning in this policy statement, setting out the PRA’s final expectations on the content of recovery plans and its approach to recovery planning for groups containing a Ring-Fenced Body (RFB).3

Business Processes Impacted: Consumer/Investing Protection
Revisions have been made to the Basel III framework to reduce excessive variability of Risk-Weighted Assets (RWA) by helping restore credibility in the calculation of RWA by limiting the use of internally modeled approaches, complementing the risk-weighted capital ratio with a finalized leverage ratio and a revised and robust capital floor, and enhancing the robustness and risk sensitivity of the standardized approaches for credit risk and operational risk.4

Prudential Regulation Authority (PRA):PRA review of Model Change related processes, Policies and ReportingPublication Date: December 12th 2017Risks Covered: Operational RiskBusiness Processes Impacted: Reporting
The agency has reviewed its Solvency II major model change and other applications processes, as proposed in their Business Plan 2017/18, in a bid to streamline processes. Along with reviewing quarterly (or more frequent) model change reporting, PRA has investigated the following: (i) how firms have completed the Common Application Package (CAP) when making model change applications; (ii) how firms have defined model changes in model change policies; and (iii) the time it has taken to assess model change applications approved since Solvency II was implemented on January 1, 2016.6

Financial Conduct Authority (FCA):Using Artificial Intelligence to Keep Criminal Funds out of the Financial SystemPublication Date: December 6th 2017Risks Covered: IT RiskBusiness Processes Impacted: Fraud and Financial Crime
Financial Crime Department Head, Rob Gruppetta, spoke on the use of Artificial Intelligence in the fight against Money Laundering, particularly with regards to the field of transaction monitoring, and some potential impacts of this in terms of regulation and regulator policies at the FinTech Innovation in AML and Digital ID regional event in London.7

International Financial Reporting Standards (IFRS):IFRS 17 Insurance Contracts—Help is at handPublication Date: December 7th 2017Risks Covered: Conduct RiskBusiness Processes Impacted: Corporate Finance, M&A and Advisory
In 2021, insurers will apply the new accounting requirements pertaining to IFRS 17 Insurance Contracts. Since the International Accounting Standards Board issued IFRS 17 in May 2017, the agency has been providing support to insurers and others in understanding these new requirements.10

The Board of Governors of the Federal Reserve System (The Fed):Community Reinvestment Act RegulationsPublication Date: December 27th 2017Risks Covered: Business Cycle RiskBusiness Processes Impacted: Funding & Liquidity Management
The agency together with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), are amending the Community Reinvestment Act (CRA) regulations to adjust the asset-size thresholds used to define a “small bank” or “small savings association” and an “intermediate small bank” or “intermediate small savings association.”13

Financial Conduct Authority (FCA):Handbook changes to reflect the application of the EU Benchmarks RegulationPublication Date: December 20th 2017Risks Covered: Compliance RiskBusiness Processes Impacted: Consumer/Investing Protection
The agency has published a Policy Statement on handbook changes to reflect the application of the European Union Benchmarks Regulation (BMR). The document provides feedback on the responses received following a consultation to make the handbook consistent with the BMR. Applicable as of January 1, 2018, the document also includes near-final draft rules, as the legislative framework for the Handbook changes is not yet in place.14

Prudential Regulation Authority (PRA):Responses to CP18/17 Occasional Consultation Paper – Chapters 7 and 8Publication Date: December 15th 2017Risks Covered: Conduct RiskBusiness Processes Impacted: Risk Management & Stress Testing
The agency has published amendments relate to the second Markets in Financial Instruments Directive (MiFID II); Insurance Distribution Directive (IDD) forms; European Union Benchmarks Regulation (BMR); and a consequential amendment to Short Form A. BMR amendments apply as of January 1, 2018; MIFID II changes will apply as of January 3, 2018; and IDD and Short Form A changes apply as of February 23, 2018.15

Financial Conduct Authority (FCA):EBA Guidelines on Operational and Security Risks under PSD2Publication Date: December 19th 2017Risks Covered: Operational RiskBusiness Processes Impacted: Payments
The agency has published its Final report on EBA Guidelines on the security measures for operational and security risks under PSD2 (EBA-GL-2017-17). The FCA confirms it will comply with the Guidelines, and it will consult on the application of the Guidelines as well as setting out the FCA’s expectations on payment service providers’ (PSPs) future reporting requirements in 2018.16

European Insurance and Occupational Pensions Authority (EIOPA):EIOPA calls for consistent Supervisory practises on Internal ModelsPublication Date: December 20th 2017Risks Covered: Compliance RiskBusiness Processes Impacted: Audit, Legal & Compliance
The agency has issued an opinion on Common Supervisory Practices throughout the European Union, and which includes supervisory assessment of Internal Models and a Dynamic Volatility Adjustment (DVA).18

European Insurance and Occupational Pensions Authority (EIOPA):EIOPA analyses the first Solvency and Financial Condition Reports and Identifies areas for ImprovementPublication Date: December 18th 2017Risks Covered: Credit Concentration RiskBusiness Processes Impacted: Reporting
The agency has published a supervisory statement following the analysis of a sample of 2016 Solvency and Financial Condition Reports (SFCRs) published by insurance groups and (re)insurance undertakings in the European Economic Area.19

European Insurance and Occupational Pensions Authority (EIOPA):EIOPA’s Stress Test identifies spill-over risks into the real economy from shocks to the European Occupational Pensions SectorPublication Date: December 13th 2017Risks Covered: Business Cycle RiskBusiness Processes Impacted: Risk Management & Stress Testing
The agency has published a report of its findings from its 2017 Occupational Pensions Stress Test. The report includes EIOPAs assessment of the potential transfer of shocks from Institutions for Occupational Retirement Provision (IORPs) to the real economy and financial stability through sponsor support and benefit reductions, and the resilience of IORPs to a “double-hit” scenario that combines a fall in price of assets with a drop in risk-free interest rates.20

FORTHCOMING REGULATIONS:

The Board of Governors of the Federal Reserve System (The Fed)Enhanced Disclosure of the Models Used in the Federal Reserve’s Supervisory Stress Test
The agency is inviting comment on an enhanced disclosure of the models used in the Federal Reserve’s supervisory stress test conducted under the Board’s Regulation YY pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Board’s capital plan rule. Comments to be received by January 22, 2018.21

International Association of Insurance Supervisors (IAIS)Consultation: Draft Issues Paper on Index-based Insurances
The agency is seeking feedback on a Consultation developed through the Financial Inclusion Working Group’s (FIWG) drafting team about Index-based Insurances. Comments should be submitted on or before January 29, 2018.23

European Commission (EC)Consultation Document Fitness Check on Supervisory Reporting
The agency has published a public consultation to act as a fitness check of the existing EU supervisory reporting requirements in the financial sector. The agency is requesting feedback from respondents on ways in which supervisory reporting could potentially be simplified and streamlined going forward. Responses to be submitted via the online questionnaire by February 28, 2018.24

HM Treasury (HMT)UK establishes New Money Laundering watchdog
The agency has announced that a new watchdog, the Office for Professional Body AML Supervision (OPBAS), has been created in an effort to improve the UK’s defenses against money laundering and terrorist financing. Operating within the FCA, the OPBAS will oversee 22 accountancy and legal professional body AML supervisors in the UK and with a focus on ensuring that the bodies meet the Money Laundering Regulations 2017’s standards. The OPBAS regulations will take effect on January 18, 2018.25

Australian Prudential Regulation Authority (APRA)Revisions to the Prudential Framework for Large Exposures
The agency has published its regulation impact analysis of revisions to the large exposures framework, covering areas pertaining to assessment of problems and objectives of government actions; options to achieve the objectives and impact analysis; and the appropriate options to be taken. On release of Prudential Standard APS 221 and Reporting Form (ARF) 221, authorized deposit-taking institutions will have until January 1, 2019 to comply with the revised large exposure requirements and until January 1, 2020 for requirements in relation to groups of connected counterparties and look-through of structured vehicles.26

The International Association of Insurance Supervisors (IAIS)Activities-based approach to Systemic Risk
The agency has issued a call for feedback on its interim public consultation paper regarding an activities-based approach to systemic risk. The paper allows stakeholders an opportunity to provide input into the development of an activities-based approach and to comment on IAIS’ proposed work on activities-based policy measures.28

The “Regulatory Reform” newsletter is the monthly initiative aimed at updating the Finance & Risk community with the most recent regulatory changes impacting Banking, Capital Markets & Insurance firms. We track more than 70 regulatory and industry bodies covering North America, Europe and Asia-Pacific. Every month, we will highlight approximately 20 regulations shortlisted on the basis of geography of coverage and anticipated business impacts. Our summaries will highlight the risks covered and business processes affected by the regulatory reforms.

Disclaimer

This blog is intended for general informational purposes only, does not take into account the reader’s specific circumstances, may not reflect the most current developments, and is not intended to provide advice on specific circumstances. Accenture disclaims, to the fullest extent permitted by applicable law, all liability for the accuracy and completeness of the information in this blog and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professional.

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